Everett Public Facilities District 2/28/2002

($1,000,000), shall be held in a joint account established by Lessor and Lessee that requires the signature of both parties ("Joint Account") and applied in the following manner: (a) first, to pay amounts due on all outstanding Permitted Debt in accordance with its terms ; (b) second, for the purpose of defraying the cost of repairing, restoring, replacing, or rebuilding any structure or improvement on or in the Premises as provided in Section 6.6. hereof; and (c) third, if the damaged or destroyed structure or improvement is not repaired, restored, replaced, or rebuilt as hereinafter provided, said funds shall be invested as provided in Section 6.7. Section 6.6 Application of Proceeds of Physical Damage Insurance. In the case of any loss covered by insurance policies described in Section 6.2.3, the application of insurance proceeds from damage or loss to property shall be determined in accordance with Article 7 hereof and, in the event of any such repair, replacement, restoration, or rebuilding, the proceeds of the insurance collected shall be applied to the cost of such work upon receipt of certificates of satisfactory progress and completion by the licensed architect or engineer in charge of the work. Any amounts payable to Lessee for work or services performed or materials provided as part of any such repair, replacement, restoration, or rebuilding shall not exceed competitive rates for such services or materials and Lessee shall, upon request of Lessor, make available to Lessor and its representatives, all books and records of Lessee relating to such work, services, and materials. Upon completion of such repair, replacement, restoration, or rebuilding in accordance with the provisions of this Lease, and the full payment therefor, any insurance proceeds not used shall be paid to Lessee. Section 6.7 Investment of Proceeds. The Lessor and Lessee shall by mutual agreement determine how to invest any insurance proceeds received and funds derived from the operation of Articles 6, 7 or 12; provided, however, if Lessor and Lessee cannot agree to the investments to be made, such funds must be invested in one or more of the following types of bonds and securities: (a) Bills, certificates, notes or bonds of the United States; (b) Other obligations of the United States or its agencies; (c) Obligations of any corporation wholly owned by the government of the United States; (d) Indebtedness of the Federal National Mortgage Association or its successor; (e) Obligations of the Washington State Local Government Investment Pool; and (f) Time deposits in commercial banks. Income from the investments shall be treated as part of the insurance proceeds held in escrow. 10 GROUND LEASE COE--EPFD